Since we can't predict the future, use your best
guess what the average interest rate will be over the life
of the loan. This includes Interest Only loans where the
interest rate is not fixed for the duration of the loan.)

How To Do The Comparison

Fill in the details for your particular case, then enter any different
conditions in the scenario 2 boxes to compare the effect of changes those
variables. The output is below the form; there's a link to jump down to
a bottom-line net worth comparison if you don't want to inspect each month's
results. It's prefilled with some random assumptions.

Using the scenario 2 variables, you can compare two cases based on
different loan amounts, interest rates, number of points, whether to
borrow or pay cash, different appreciation rates, different tax rates,
etc.

In particular, for your goal (comparing two potential properties),
fill in the data for Scenario 1 and the shaded boxes
in Scenario 2. You may, of course, change any non-shaded values for Scenario 2
that make sense for your situation.

The results take the form of a monthly journal showing your "bank balance"
paying the mortgage monthly payments, taxes, etc., and assuming you sell
the property at the end of the month to determine your effective net worth.

A table at the end compares your net worth month by month so you can
see how long you'd have to hold the property for the first scenario
to do better/worse than the second.

Assumptions for scenario 1

Assumptions for scenario 2
(Anything left blank will be same as for scenario 1)

Purchase price of the property:
(Current value of property if refinancing; $0 if renting)

$

Purchase price of the property:

$

Loan amount:
(Amount of new loan or amount to refinance)

$

Loan amount:

$

Loan interst rate:

%

Loan interst rate:

%

#months of loan (30yr=360, 15yr=180):

#months of loan (30yr=360, 15yr=180):

Loan discount points:

Loan discount points:

Interest only loan?

Yes, interest only

Interest only loan?

Yes, interest only

Amortize points over life of loan?:
(As noted in
this article,
points can be deducted from taxes in the first year under certain
conditions, else must be amortized over the life of the loan.
Check this box if you'd have to amortize the points -- e.g.,
this is for a second home. For first mortgages on your primary
residence you can probably leave this unchecked.)

Yes, must amortize points

Amortize points over life of loan:

Yes, amortize

Other closing fees:

$

Other closing fees:

$

Commission and other fees to sell property as % of sales price:
(e.g. real estate agents charge 6-7% plus other closing costs;
this is used for when you sell the property, later)

Household monthly income -- net, after taxes, of your W2/self-employed income, not including investment income, interest, or dividends:

$

Household monthly income:

$

Percent salary raise you expect each year:

%

Percent salary raise you expect each year:

%

Monthly expenses other than for the loan in question (rent, property tax, insurance, food, etc.):

$

Monthly expenses other than for the loan in question:

$

Credit card interest rate (if you need to borrow to make the mortgage payments):

%

Credit card interest rate:

%

%/year your investments will increase:
(E.g., banks pay around 0.2%, the Down Jones has
increased around 9% annual over the last 30 years
and around 6.5% over the last 50 years)

%

%/year your investments will increase:

%

Tax rate for investment capital gains:
(Rates vary from 8% on up to your tax bracket rate.
Depends on type of investment; your likely want the 'long term'
rate if you buy and hold stocks, or the 'short term' rate if you have
a money market. See
this page
for hints.)

%

Tax rate for investment capital gains:

%

Tax rate for property capital gains:
(E.g. set to 0 if doing a 1031 exchange)

%

Tax rate for property capital gains:

%

Tax rate for interest deductions (your max income tax rate):
(E.g., tax rates are 10/15/25/28/33/35/39.6%; see
this article
for current rates.)

%

Tax rate for interest deductions (your income tax rate):

%

Years until you think you'll sell or refinance the property:
(Not used in computation, only for describing results; decimals
okay like "4.5")

For grins, your guess which scenario will be better:
(Not used in computation.)